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Post 0

Saturday, December 18, 2004 - 10:42amSanction this postReply
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I particularly like your discussion re: the types of situations where gradualism is acceptable and where it is not. In defense of George Bush, any gradualism that allowed people complete freedom of choice with their retirement money to start would surely be defeated. Look at the line up of special interests that are ready to work for the defeat of this modest proposal. I think he has brought it just as far as he possibly could. It will take a similar sense of unity amongst those of us who wish to change from a welfare state to a more free one for us freedom fighters to prevail.



Post 1

Sunday, December 19, 2004 - 1:39pmSanction this postReply
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I agree that gradualism is right for Social Security. It is a matter of justice to not "pull the rug out from under" those in or near retirement. Also, they were taxed to support the program for all their working lives. The gradualism, or phase out, could be attained by increasing the retirement age and/or scaling down the amount of benefits. The cutbacks could be in several degrees, the more severe for those born later. (I think it would be fair to cut benefits more for "double dippers".) It was the earliest recipients who got far more than they paid in. It will have to be the latest who get the least compared to what they pay in.



Post 2

Wednesday, October 1, 2008 - 3:48amSanction this postReply
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Merlin,

It is in your last sentence "It will have to be the latest who get the least compared to what they pay in." that lies the greatest challenge to phasing out social security.

Pushing the benefits back, and trimming benefits - both of which are being employed now - are one effective way of weaning the public off social security. This program is currently fully funded though, by those still in the job market. Even with tapered the pay-outs, social security demands higher and higher amounts of employment tax, creating a debt to those workers, while offering them less and less in return. Unquestionably, these later workers will bear the financial brunt of any gradual return to private responsibility.

I would personally expect that the long term solution is to gradually increase private retirement investment, while gradually decreasing the government tax-funded retirement 'ponzi' schemes.

I think that I might disagree with Tibor in one regard. There is justified concern in the government's assuming a "paternal" control over an individual's retirement planning. However, I am unconvinced that we - as individuals - are not harmed by those many of us that do not make any logical plans for funding their retirement. After all, that predilection is what spawned all these government programs in the first case, and a continued sense of irresponsibility would only spawn new generations of socialistic paternalism -by new generations of 'well-intended' people.

Knowing that it is important and smart to set aside personal funds for retirement is a lesson that each individual before us has learned, usually the hard way. Also important, I think, is knowing that in the end, in some form or fashion, we will somehow ultimately be forced to pay for these errors of others. There are charities, of course, that could help address the problem, but are unlikely to be sufficient. Given the proposition that we will - in all likelihood - (talking probability, not ethics here) be eventually forced to foot the bill, should we not require individual citizens take personal responsibility for their long term retirement needs. We expect them not to cross a busy street against a red light. This hard earned lesson is not so very different.

jt



(Edited by Jay Abbott on 10/01, 3:49am)




Post 3

Wednesday, October 1, 2008 - 4:21amSanction this postReply
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Jay, it seems we agree.

You write:
Given the proposition that we will - in all likelihood - (talking probability, not ethics here) be eventually forced to foot the bill, should we not require individual citizens take personal responsibility for their long term retirement needs.
You worded it like a question, but didn't use a question mark. I'm not greatly in favor of "forced saving", but regard it one of the less harmful things government could do. If there were a "forced saving" law, I would suggest it only start at age 40 or 45. Maybe you already saw it, but I commented on this "forced saving" issue here (last half). 




Post 4

Wednesday, October 1, 2008 - 6:43amSanction this postReply
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Merlin,

Yes. Saw your earlier post. The most practical solution that has come along in recent years has been the 401k program. Of course this is only just a small concession made by government in the tax code, but in practice it has essentially replaced much of the old pension systems. With the 401k the individual clearly owns the account, and still retains access -with restrictions. Also, as it allows individuals to reduce their tax burden, it acts like an additional incentive to save.

While the 401k plans reduced the number of pension plans that were available through longevity in a company, it is generally transferable, so individuals can continue prudent saving without penalties. Too bad it's tied to taxes, but don't want to get into the tax issues, as I don't think any truly reliable practical alternative has been offered.

jt



Post 5

Wednesday, October 1, 2008 - 9:32amSanction this postReply
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The only solution is to stop it dead NOW - count up what everyone paid - and that is the obligation to be paid back, with interest, to those whose money was confiscated.  This way, while painful, it is 1)  Fair and 2)  A finite amount to pay for.  Those who get money now can get a lump sum covering what they paid.  If they already took more, tough luck they don't deserve more anyway.



Post 6

Wednesday, October 1, 2008 - 9:51amSanction this postReply
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Kurt, that's a solution, not the only one. Do you realize how much your proposal would cost? It would more than double the national debt, now near $10 trillion. That's OASDI only, too.

Edit: After seeing Kurt's reply (post 7), I should have been clearer. Kurt's solution implies issuing over $10 trillion in new Treasury debt immediately and/or printing money. On the other hand, a phase-out would pay future OASDI benefits from future taxes for OASDI, as is done now.

(Edited by Merlin Jetton on 10/01, 2:54pm)




Post 7

Wednesday, October 1, 2008 - 1:41pmSanction this postReply
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It will cost that much anyway, really, and prevents it from getting worse.  Any other way is unethical - of course that never stopped government before.

My only was somewhat hyperbolic in nature -




Post 8

Wednesday, October 1, 2008 - 3:33pmSanction this postReply
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I really like the intent and the ethical stance behind Kurt's solution, but the size is so great that I don't think it can be done. We would be trying to collect that sum from us to pay us - and it doesn't look like it would work.

But I'm open to suggestions for making it work (especially given my age and how much I've paid in :-)

Maybe the government could issue bonds to each person that totaled what they had paid into SSI (less what they had taken out if they are retired already) - non-interest bearing bonds with COLA adjustments to offset inflation - bonds that repaid the principle plus COLA via a series of coupons. That eliminates the paying of long term interest on the debt and current taxes revenues only need to cover the coupons as they come due. The youngest taxpayer's - say someone now who is 10 years old and has a paper route, gets a pretty small bond, and it won't have any coupons redeemable till he is 62. Someone like me would get a really big collection of bonds - representing a lifetime of work, and there would be coupons starting as soon as the person reaches 62 or 65 or whatever, but the person would have to live till they reached, say, 90 to cash them all. Not entirely fair - especially if the person croaks at 70, but that's life and it matches the payout of the original program where you needed to live a long time to get your money back. I don't know how much this scheme would help.

It might all be academic anyway - if we go into a major credit contraction (read "depression") - or if government finally adds that last straw to the camel's monetary back and makes it impossible to continue the practice of spending significantly more than it takes in.

And if things continue to go badly in the economy, in about a decade the working generation may just decide to put old people adrift on ice bergs, metaphorically speaking, after feeling the strain of trying to carry the burden of supporting one old guy (usually a gal - they live longer), out of the tax proceeds of just half-a-dozen workers. Mob psychology and pent up angers... Bye Bye you old farts!



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